Nashville’s business community has been active, if not wildly successful, in attempting to catch the wave of dot.com riches in the New Economy. Nashville’s economy is service oriented, with health care and country music being the region’s dominant and highest profile business sectors.10 The city also has traditionally had an entrepreneurial spirit, and a number of Internet start-up companies have cropped up in the past several years. These companies have not generated the Internet riches through initial public offerings that might set off a cycle of dot-com start-ups in Nashville. But business leaders in Nashville are hopeful of a huge dot-com success, particularly in the online health care business. To set the stage, business leaders have established a technology council within the Chamber of Commerce and launched a private-sector dot-com incubator. They are developing an “urban technology district” and are in the early stages of establishing a network of angel financiers for start-ups. However, as has been the case around the country, the recent shakeout in the dot-com world has restricted the flow of capital to Internet start-ups in Nashville.
On the social side, the city until recently has been slow in using the Internet to reach out to neighborhoods (low-income and otherwise) and to improve delivery of public services. But new leadership in the metropolitan government has adopted an activist posture toward using the Internet for community and public purposes. Nashville’s new mayor, Bill Purcell, took office in 1999 and ran on a platform of doing more to reach out to neighborhood groups—an outreach effort that will include use of the Internet. As for bottom-up initiatives by citizens to use the Internet for social purposes, Nashville received a huge boost when it received a $477,000 grant from the U.S. Commerce Department’s TOP program for a community online project explicitly designed to enhance civic participation in the Nashville area. Citizen activists were the driving forces behind the application, although the grant recipient is the Metro Nashville-Davidson County Planning Department.
The Internet and the Community
Nashville has a distinctive system of government dating to 1963, when the governments of the city of Nashville and Davidson County were combined. The result is the Metro Nashville-Davidson County government in the region, a 533-square-mile area in Middle Tennessee that is known simply as Metro. The expansive nature of the region’s government—embracing rural and urban areas—has led to some special problems when it comes to compatibility of information systems and distribution of public information.
i. Information Technology in Nashville: Raising the Grade
Metro officials in Nashville were jolted in February 2000 when Governing Magazine’s Government Performance Project gave a D+ grade in information technology in the context of an otherwise solid rating for Metro Nashville Davidson government. The poor grade was attributed to a patchwork of old and rarely compatible computer systems, some with hardware dating to the 1970s that made impossible simple tasks such as sharing files across departments. Because of the poor information system, and also because of the culture of Metro government, Metro departments see themselves as a collection of separate enterprises, not a single entity. This means that agencies’ Web sites have very different looks and almost no interactive or transactional capabilities.
Mayor Purcell has made upgrading information technology a priority. Upon assuming office, he brought in a new director of Information Systems, Richard McKinney, to improve networks citywide and to make delivery of city services more Web-friendly. Mayor Purcell, according to McKinney, hopes that a major overhaul of the city’s information system can help fundamentally reform Nashville government and improve services for citizens. In terms of Web page design, McKinney wants Nashville to move away from pages that do little more than display organization charts to pages that post meaningful information to citizens.
Exactly when that might occur hinges on bandwidth. The Metro government last negotiated a cable franchise in 1995 with Intermedia. However, AT&T acquired Intermedia last year, which will result in a transfer of the franchise to AT&T and a formal reopening of franchise negotiations. Metro’s Information Services department wants to use these negotiations to build Metro an institutional network, or I-Net, providing “bureaucrat to bureaucrat” communication within Metro government. As AT&T upgrades Intermedia’s cable network with fiber-optic cable, Metro hopes to have two strands of fiber set aside for government use and have the company provide “drops,” or technical links, to Metro facilities. This would include government buildings as well as community centers. The Information Systems department was in the midst of these negotiations in the Fall of 2000; even if it is successful, it will take time to complete the upgrade and run fiber to Metro facilities.
Because of the antiquated information system, use of the Internet by Metro departments is mixed. The public library receives high marks; its catalog is online, and the library system provides Internet access city wide with many public access terminals. By contrast, the Metropolitan Development and Housing Agency has been slow to integrate the Internet into its operations. In fact, there is little evidence that the agency has given much thought to how the Internet might improve delivery of services to residents of affordable housing or how Internet use by clients might improve their lives. The primary initiative in Nashville to provide Internet and computer training in low-income housing units is a U.S. Department of Housing and Urban Development Neighborhood Network at the Cayce-CWA public housing development. Cayce-CWA has a new computer lab, with 15 computers with high-speed connections to the Internet and Internet training provided to parents and kids.
ii. Designing a Community Online
The upgrade of city information technology is occurring at the same time as citizen activists have been clamoring to use communications networks to link neighborhoods together with each other and Metro government. Historically, neighborhoods in Nashville have not had their voices heard in city politics. Part of this is due to lack of organization. Fifteen years ago, only about a half dozen neighborhood groups existed in the city, and they had a difficult time being recognized as legitimate groups by Metro government. The number of neighborhood groups has swelled to nearly 200 in recent years, but these groups still feel that Metro government has not always been receptive to their concerns.
Much of this changed with the election of Mayor Purcell in 1999. Purcell ran on a platform of welcoming neighborhood groups into Metro government’s decision-making processes. Partly because of this, he won a resounding victory. Among his earliest acts was to create an Office of Neighborhoods to coordinate with Nashville’s numerous neighborhood groups. Soon thereafter, Purcell appointed a new director of Metro’s Planning Department, Rick Bernhardt, who has committed to encouraging greater citizen and neighborhood-group participation in planning decisions. Part of Bernhardt’s agenda is to promote “New Urbanism” in Nashville, an urban design movement that favors dense downtown growth and neighborhood development to urban sprawl.
The Internet is not going to be the sole ingredient in Nashville’s revival of dialogue between government and neighborhoods, but it is certainly envisioned as part of the picture. Working with the Nashville Neighborhood Alliance, the Metro Planning Department won a $477,000 federal grant from TOP program for its “Designing a Community Online” project. Adding in-kind contributions from Metro Planning, the total cost of the project is $1,153,000. The name of the project implies that the Internet will be a tool to enhance community life, not a means to move community interaction from the physical world to cyberspace. The TOP grant application identifies a number of barriers to public participation and civic engagement and proposes to use the Internet to address them. Among the problems the application identifies are:
- Inaccessibility of public information—public information is widely dispersed in Davidson County, and community groups often do not know where it is. There is no central office that might direct citizens to the right information.
- Community groups’ lack of access to information makes it difficult for them to participate in shaping the community’s future.
- Insufficient dissemination to the public of changes to zoning regulations and of development decisions.
To address these problems, the TOP project proposes a two-fold strategy of assembling Metro content in user-friendly ways and increasing the number of public access sites throughout the Metro area. The project will put the following kinds of information online for the public: crime, land (e.g., floodplains, topography), historic properties and sale values, development plans, street plans, public transportation, population, and a variety of resources for the neighborhoods (boundaries, contact information, community-based social services). The goal is to make this information visually appealing, searchable by census tract, and available to citizens in different languages using language-translation software.
The project aspires not only to add to the amount of available public information in Nashville, but also to stimulate additional participation in civic affairs. To do this, it proposes to use geographical information systems (GIS) and other sophisticated software tools to promote dialog between citizens and Metro. For example, using GIS tools, the Planning Department will create interactive maps so citizens can see where zoning changes will occur or where subdivisions are planned. This software will enable the Planning Department to administer online surveys to assess citizens’ views on development decisions.
Another application is the Visual Preference Survey (VPS), which displays pictures of alternative development possibilities online. Citizens can then register their preference. Usually, administering visual preference surveys requires a public meeting on a weekend at which city planners show alternatives on large poster boards or on overhead projectors. Turnout can be low, and people with busy weekend schedules rarely attend.
As for public access, the grant proposes to purchase 75 computers, all connected to the Internet, and place them in 53 neighborhood and ethnic-based organizations in the Nashville area. The Neighborhoods Resource Center will partner with other educational entities to train people at the neighborhood sites on how to use the Internet and navigate the new public information on the Metro Web site. This initiative is not a home-based or community Internet access project. Rather, the hope is that people in the neighborhood centers will serve essentially as Internet evangelists for individuals in their community.
The “Designing Community Online” project is very ambitious in scope, as it tries to simultaneously address government content and community connectivity—all from a $477,000 cash grant from the U.S. Commerce Department and an additional $700,000 in resources from Metro Planning. At best, the project is a modest first step for Nashville, but an indispensable one nonetheless. As Metro Planning and the Council of Community Services recognize, the project itself is an innovation for Nashville. Its benefits will come not just from additional electronic communication, but also from bringing together disparate community actors to plan Nashville’s Internet future.
iii. Arts and the New Media
With its country music scene, large university population, and cultural reputation as “the Athens of the South,” Nashville has a large and diverse artistic community. Nashville is attempting to exploit these advantages to promote local artists and to translate Nashville’s artistic creativity into dot-com businesses.
The Metro Arts Commission has undertaken an inexpensive project that tries to expand the sales of the wares of Nashville artists. At the initiative of Richard Mitchell, a local artist and Arts Commission volunteer, the Commission provides space on its Web page for artists to post pictures of their work. Artists pay $12 to submit three slides to be scanned onto the page, and then their name and contact information are posted. This opens their work up to a much wider audience; in fact, a number of artists have made Web sales to people far away from Nashville. Some artists have still declined to participate.
Another foray into linking the creative community with Internet business ideas is the Nashville Internet and New Media Association (NINMA), a loose affiliation of entrepreneurs founded in late 1999. NINMA’s mission is to “educate and expand the Nashville Internet community, as well as give the Internet community a place to gather and discuss issues.” The association’s membership divides itself into committees oriented toward business services that an Internet entrepreneur might need, such as help with sales and marketing, legal and financial services, and design and development. NINMA also has two content areas among its subcommittees, entertainment and health care, reflecting Nashville’s desire to be a player in these Internet business areas. In addition to referring members to business services, NINMA holds forums that allow people to exchange ideas informally and to air important issues facing Internet businesses.
An example of the latter was an October 2000 forum on Napster called “Canary in the Coalmine: Survival of Intellectual Property on the Internet.” The forum allowed songwriters, music publishers, and record companies to air their perspectives on Napster, which at the time allowed the trading of music over the Internet at no charge. The forum did not settle the question of whether such activity was appropriate, nor did the business models it examined catapult any Nashville Internet start-up to riches. Yet NINMA members are hopeful that the interaction NINMA facilitates will over time contribute to the economic viability of Nashville’s new media Internet firms.
The Internet and Nashville’s Economy
Nashville’s promise in the Internet economy rests with its entrepreneurial spirit and its existing regional strengths in health care and country music. Efforts to capitalize on Nashville’s New Economy potential revolve around two initiatives. The first is the Nashville Technology Council, an organization affiliated with the Chamber of Commerce. The second is a technology incubator called eConception.
i. Incubating Nashville’s Economy: eConception
The primary initiative in Nashville to foster Internet start-ups is the business incubator eConception, which provides seed capital and business services to companies with ideas to exploit the Web. The incubator was founded in 1999 with $9.2 million in capital and with seven companies in its portfolio. EConception provides office space and other business services to its companies in a renovated warehouse called Cummins Station. This large structure, located near downtown Nashville, now houses about 10 eConception companies at any given time, which occupy 20,000 square feet of leased office space.
The idea for eConception, as with most incubators, is to bring a company to maturity and allow it to operate on its own; eConception is compensated by a share of profits or, better yet, with shares in an IPO. The vision of IPO riches has not been realized, and eConception is contemplating a change in strategy as a result. With the market for Internet IPOs waning and investors increasingly wary, eConception may sell its equity position in its companies and move toward providing incubator and business services for a fee. Rather than raise capital itself, eConception may partner with venture capital firms to channel funds to eConception’s start-ups.
Even with a possible upheaval in the offing, eConception has produced some modestly successful companies. Weberize is a Web architect firm that will not only design Web pages for clients, but also transform a client’s information management system into a Web-based platform for an intranet or Worldwide Web presence. Another company, Groovetone.com, is an attempt to capitalize on Nashville’s reputation as “Music City USA.” Groovetone.com assembles “Americana” music at its Web site—largely country and western, bluegrass, and folk music—to serve as a portal for fans of the genre. Working cooperatively with record labels, Groovetone provides RealAudio clips of artists’ songs, sells CDs, and even has a Groovetone radio station.
The Weberize and Groovetone stories show the promise and potential pitfalls of an incubator such as eConception. Weberize provides a clear service to its clients—in a market that is very competitive for Web-design services—and if it carries out its business plan, Weberize can certainly be a profitable company, if not the next IPO star. Groovetone falls more into the category of a brand-based Internet company–one that delivers an established service in a new way and thus must spend a lot on advertising to create brand awareness. If Groovetone fails to gain necessary “mind share”, its long-term business prospects are questionable. The music industry as a whole is struggling to find the right business model for the Internet; as far as Nashville goes, neither Groovetone nor other start-ups in Nashville have found a way to make Music City USA a hub for online success.
Whatever eConception’s fate, the incubator is the flagship physical space for ecommerce and Internet start-ups in Nashville. A building of four high-ceilinged stories, the Cummins Station structure takes up an entire city block. EConception and its companies occupy part of one floor, with the remaining space taken up by other Internet start-ups and arts organizations such as the Metro Arts Commission. In fact, the Metro Housing and Development Agency has designated the area including and surrounding Cummins Station an arts center redevelopment center. With technical expertise adjacent to artistic talent, eConception hopes to be part of a Cummins Station complex that drives Nashville’s Internet economy.
Another attempt to develop physical space for innovative companies in Nashville is known as “The Gulch.” Developers hope to transform the Gulch into a “dynamic urban environment”. This project, located near Cummins Station, will bridge downtown and Music Row, with a mix of high-end and affordable housing and retail and office space. The ambitious 25-acre development will cost $350 million and is intended to “offer a contemporary urban lifestyle” for Nashville, giving the city a 24-hour-a-day downtown. The Gulch also plans to use nearby universities to attract Internet and biotechnology start-ups to the area. The development is driven by the private sector, but the city has pledged support and has offered $15 million in tax increment financing for the Gulch.
ii. The Nashville Technology Council
In addition to developing a physical space for innovation, Nashville business leaders are establishing a network of people designed to foment dot-com ideas among creative people. The Nashville Technology Council (NTC), a year old offshoot of the Chamber of Commerce, provides this sort of environment for the Middle Tennessee region. The Council’s director, entrepreneur David Condra, says the NTC’s membership grew rapidly, reflecting pent-up demand for a forum at which entrepreneurs can exchange ideas and expand their network of business contacts. The Council’s main service so far is providing networking events for members. One is a monthly breakfast meeting with a keynote speaker—the kick-off speaker was U.S. Senator Bill Frist—which members treat mainly as an opportunity to meet like-minded entrepreneurs. The Council also has topical events at which speakers talk about how to raise capital and develop a business plan.
The next major undertaking for the Council will be the Technology Funding Alliance, which will be an investor network for Nashville Internet entrepreneurs. A challenge for Nashville—not unlike that facing Cleveland—is how to engage wealthy business people whose fortunes were not made in the dot-com world in channeling funds to Internet start-ups. Whether in health care or publishing, Nashville’s old-line business leadership is thought to be conservative with its money, which is understandable given the novelty and volatility of the New Economy. Launching the alliance is proving to be difficult, mainly due to the stock market’s increasing skepticism toward Internet start-ups. The Technology Funding Alliance was initially scheduled to kick off in January 2001; the launch has been postponed.
The climate for Internet companies in Nashville would clearly benefit from a big dot-com success that would generate wealth that would then be reinvested in the region. This has not happened, and the two companies that held the most promise have not met what were once very high expectations. Healthstream is perhaps Nashville’s most prominent ecommerce company; it provides online computer-aided medical training for health care professionals. Its CEO is Robert Frist, Jr., a member of one of Nashville’s most prominent families, which made its fortune from the Columbia/HCA health care company. Healthstream issued its initial public offering in April 2000, just before the market backed away from dot-com IPOs, and managed to raise about $50 million in capital. As has been the case with other dot-com stocks, however, the past nine months have been unkind; as of early December, Healthstream was trading at $1.13 per share, well below its high of $11 per share. And stock price is not Healthstream’s only problem. The company had announced a major marketing partnership with Healtheon/WebMD, a popular health care portal, in hopes that the traffic to Healtheon’s site would spur demand for Healthstream’s services. Because of Healtheon’s business problems, this agreement has been put on hold.
BlueStar was Nashville’s other dot-com disappointment. BlueStar provides high-speed Internet connections using digital subscriber line (DSL) technology; the company’s target markets are Southeastern cities with populations of less than 1.5 million. The DSL business is capital intensive and requires heavy investment in routers and switches before customers can be served. BlueStar initially won $31 million in venture capital from Crosspoint Venture Partners, and by early 2000, the company filed its intent to issue an IPO to raise up to $200 million. That was postponed indefinitely, and Covad Communications, a national DSL provider from California, wound up acquiring BlueStar in June. With a loss of $18.8 million in 1999 on revenues of $800,000 and capital markets balking, BlueStar’s continued viability depended on merging with another firm.
Nashville is in a classic bind when it comes to funding Internet businesses: The lack of Internet successes makes investors reluctant to invest, and the reluctance to invest lowers the chances of a dot-com success. Yet David Condra sees tight capital as a potential blessing: It will discipline entrepreneurs and financiers to create and fund business plans that are conceptually sound, address market needs, and have valid Internet solutions. Given the strong entrepreneurial spirit in Nashville, Condra is hoping that this spirit, supported by the Technology Council, will position the city as a player in the Internet economy.
The Internet and Social Capital in Nashville
The Internet’s impact on social capital has been fairly modest in Nashville. There is some evidence of altered “foot traffic” in the city attributable to the Internet but little evidence of community-generated Internet content. However, the Designing a Community Online TOP grant has been a catalyst for community activists and government officials to jointly consider the Internet’s role in improving Nashville’s traditionally balkanized neighborhoods. And the Internet’s potential to provide public information and improve service delivery has been recognized, though perhaps belatedly, by the Information Services department of Metro government.
At this point, the Arts Commission’s Web site for artists is the only real evidence of content. Still, Nashville has a lot of what a region needs to succeed in the Internet society: a core of creative people and a strong tradition of entrepreneurialism. In Cummins Station, it is trying to develop the right environment for creative people to pursue business ideas, and the Nashville Technology Council hopes to provide the people-to-people networking and financial support that is necessary.
This unevenness between Nashville’s economic and social awareness of the Internet’s opportunity suggests that a great deal of patience will be required in the region as Internet initiatives evolve. A TOP grant by itself will not be sufficient to change neighborhoods’ engagement with Metro government or improve access to low-income people. Moreover, Nashville does not have a well-developed set of community development corporations or other institutions that signal a large existing stock of social capital. And with the downturn in the dot-com sector, payoffs from the Nashville Technology Council will probably take much longer than initially envisioned, if they ever come to pass. Patience, however, may be difficult to come by in an environment where the hype surrounding the Internet—at least in the economic arena—may be fading. A challenge for Nashville, then, will be to devote resources to areas where the Internet has clearly identifiable benefits to the community.